The
function of law may be described as twofold: firstly, to regulate the affairs of
persons (persons includes corporations, societies, individuals and government);
secondly, to establish within the community a level of moral conduct. The
success may to a greater degree be based on the acceptance by the community of
these regulations and level of conduct in order to resolve disputes.

To some
degree, there has been a shift in the community expectations with respect to the
method by which conflicts are resolved. There appears to be a desire by parties
to have disputes resolved as opposed to having their day in court. This method
of resolution is not new. One form of dispute resolution, namely arbitration has
been around for centuries. In fact, recourse to the arbitration process has been
common practice in England since the middle ages and was codified in 1698, 9
Will. 3, c. 15. Arbitration has been defined in Halsbury as:

... the reference of dispute or difference between not less
than two parties for determination, after hearing both sides in a judicial
manner, by a person or persons other than a court of competetent
jurisdiction.

2 Halsbury's Laws of England, 225 (4th
ed.)

In fact, the ADR process
forms part of the Jewish Religious Court called, "The Beth Din."

The
present language of the commercial community uses the phrase ADR, standing for
"Alternative Dispute Resolution," as meaning an alternative to the public
court system. I prefer my colleague John Sanderson Q.C.'s interpretation namely
"Appropriate Dispute Resolution", thereby leaving within the arsenal of
dispute resolutions systems the use of courts for those cases which may require
a principle to be established, public vindication, or the infringement of a
legal right.

Some years
ago a Canadian publication (The Lawyers Weekly) set out the pros
and cons of various dispute resolutions methods. I reproduce this reference with
certain modifications.

METHOD

CONS

PROS

1.

Dueling

out of fashion

might get killed

usually done at dawn so it won't interfere with the work day.

2.

Coin Toss

arbitrary

cheap

simple

a penny will do

3.

War

might get killed

world might end

determines not who is right but who is left

good for business

great stories for grandchildren

4.

Bare Fists

might need cosmetic surgery afterwards

dry-cleaning bill for blood on shirt

good exercise

cheap

5.

Litigation

expensive

drags on forever

respectable

great fees (if you can collect them)

6.

ADR

used to be seen as flaky

misunderstood by those who are not in the "inside"

cheaper than litigation

quicker than litigation

pick your own decision maker or mediator

private

now very popular

most clients prefer the system once they understand it

client driven

"Disputes, unlike wine, do not improve by aging."

Willard Z. Estey, Q.C.(as he now
is).

Chief Justice Warren E. Burger said:

"A common thread pervades all courtroom contests: Lawyers
are natural competitors, and once litigation begins they strive mightily
to win using every tactic available. Business executives are also
competitors, and when they are in litigation, they often transfer their
normal productive and constructive drives into the adversary contest.
Commercial litigation takes business executives and their staffs away from
the creative paths of development and production and often inflicts more
wear and tear on them than the most difficult business problems...The
plaintive cry of many frustrated litigants echoes what Learned Hand
implied: "There must be a better
way".

Appropriate Dispute Resolution
may take many forms. Basically the intervention of a third party making the
decision is at the extreme end of appropriate dispute resolution. It is commonly
called arbitration.

There are
other forms of dispute resolution including:

Conciliation

Mediation

Early Neutral Evaluation

Mini Trials

Med/Arb

Arb/Med

Fact Finding

Rights Based Mediation

Interest Based Mediation

Neutral Based Mediation

The latter two forms have recently been introduced as methods for resolving
disputes for self regulating bodies.

ADR may be
generally classified into 3 major areas:

Negotiation

Mediation

Adjudication

I propose to deal with the latter 2 areas.

The major
difference between arbitration and the other forms of ADR is that arbitration
imposes a binding decision upon the parties - the other forms require the
parties themselves to come to a resolution of the dispute with the assistance of
the third party.

A simple
comparison between Adjudication (Arbitration) and Interest Based Mediation
illustrates the flexibility of one process vs. the rigidity of the other.

Adjudication (Arbitration)

Looks to the past.

Focuses on facts.

Seeks to establish fault/liability.

Winners and losers.

Dominated by lawyers.

Interest Based Mediation (as opposed to Rights Based Mediation)

Looks to the Future.

Focuses on relationships.

Seeks to restructure relationships.

Results in custom made resolutions.

Role for clients.

In 1810, Jeremy Bentham, in his book, The Rationale of Evidence,
described arbitration as a process by which the parties consent to judgment.
That is, the parties come to an agreement that a third party will impose a
binding decision between the parties without the aid or recourse to the public
dispute resolution system - namely the courts. I suspect this thought process
forms the genesis of the reason why the courts are loathed to overturn an
arbitrator's decision and are more susceptible to a reversal of a judge made
decision within the public court system.

Arbitration is also subject to criticism. It is not cheap. It is however,
cheaper than the court system. The major advantages to arbitration are:

The matter can be heard promptly.

The evidence is private.

The award is private.

The parties can determine who the decision maker will be (a great
advantage over the court system).

The rules for arbitration can be determined by consent of the parties as
opposed to being governed by or being required to adopt a specific set of
rules.

The lawyer's role in arbitration is similar to the lawyer's role in litigation;
that is to say the lawyer is an identifier, selector, and marshaller of the
evidence. In fact, one text describes the role of litigators as that of
historians and litigation as largely a process of recreating historical facts.
One only needs to look at the division of time spent on a case. The majority of
time is spent in gathering and presenting the evidence as opposed to gathering
and arguing the law.

During the
process of dispute resolution, the client and their counsel deal with the
evaluation of risk taking. By risk taking I mean assessing a risk - namely, the
cost if things go wrong and the probability of the occurrence. If the cost is
high, the probability must be minimized. If the cost is low, the probability may
be allowed to increase accordingly to the party's personal assessment of
"acceptable risk".

Risks are
controlled by:

The elimination of the risk.

Eliminating activities that produce undue risk.

Insuring for uncontrolled risk.

The informed consent of the client

The establishment of standards controls and regulations.

These factors come into play in any dispute either as a proactive or reactive
procedure. I shall later deal with the involvement of the solicitor in
commercial disputes and their duty to reduce or eliminate the costly downtime to
the client and to the litigator when a dispute arises.

By
proactive I mean active conduct by the arbitrator rather than a passive conduct.

The
management skills required of an arbitrator are numerous. He or she is in fact
not a judge, while still having judgelike powers, with the ability to bind the
parties in a manner I suggest in many cases no different than a judge. They are
in fact decision makers. At the end of the day when they act as decision maker
in the arbitration process one party will be happy and one party will be
unhappy. It is important for the arbitrator to ensure that he or she writes a
decision that clearly explains to the unsuccessful party the reasons for the
decision. If not, the arbitrator will be performing economic suicide.

There has
been criticism by lawyers and their clients that the arbitrator fails to take a
leading role in controlling the proceedings from the commencement to the
completion of the arbitration. Such control, without arrogance is I suggest
required in many arbitrations. Generally counsel prefer an arbitrator who
manages the whole hearing process so that decisions are made on promptly,
clearly and concisely. People like to win but when they don't win they need to
know that the process was fair.

Arbitrators need confidence in their expertise and experience coupled with the
working knowledge of business and management. One must remember that the
arbitrator relies on the parties to perform his or her directions and orders so
that the process works smoothly.

This
process requires initial planning on the part of the arbitrator with substantial
input from the parties or their counsel, including deciding whether or not they
are going to conform to a specific set of rules or adapt their own rules. Other
forms of appropriate dispute resolution may be used. For example, it is not
uncommon in certain situations to use Med/Arb.

The
structure and process should evolve and everyone should know what has to be done
and who will be doing it and within what time frame. Throughout this process the
arbitrator must have a clear idea of the necessary personal duties and
responsibilities while retaining command of the proceedings. This form of
discipline and control must be evident together with hopefully, a trace of
gentle humor.

The
process may very well commence with correspondence sent out by the arbitrator
setting out a prehearing agenda, inviting counsel for input to the agenda. This
letter is generally followed by a prehearing meeting (preferably at the
arbitrator's office) to decide a number of issues. The alternative is to have a
conference call. By taking this approach no one is caught off guard or is
subjected to "trial by ambush".

It is
important for an arbitrator to anticipate, to think ahead of possible
developments, and make the parties aware of events to come in a timely fashion.
The proceedings should be controlled with flexibility and humanity. The
arbitrator must be prepared to make clear decisions and offer directions at
critical stages.

What is
more, the parties must be aware of the arbitrator's objective at all times,
which is to ensure that natural justice based on the law and common sense based
on good commercial practice are very much evident.

I suspect
that no arbitrator comes close to being a Solomon, however, certain leadership
qualities are essential.

Derek
Sharp in his article, Applying Management Principles to Arbitration,
published in Arbitration, February 1996, listed those leadership
qualities:

Knowing and understanding what is wanted by the parties and
communicating it to all involved.

Creating a personal atmosphere, having the right appearance, body
language, voice quality and formulating the appropriate package with
flair.

Demonstrating integrity, fairness, truthfulness and the confidence
to act alone.

Having the confidence to dominate encounters, meetings and
hearings, being able to set the scene, begin to set the pace, keep
control, manage change and stop proceedings when appropriate.

Remaining calm in crises, absorbing stress, standing off to see the
whole problem, creating order from chaos, giving simple, clear directions
and knowing how to get relief from the tension after each crisis is
resolved.

Making the parties aware of where their authority, responsibility
and accountability lie and ensuring that each party performs their role
and focuses on the desired results.

Maintaining discipline by establishing ground rules of behavior,
being punctual and reliable and by offering a good example.

Gauging the place and timing of action, knowing the right moment to
intervene, being consistent in directions and stimulating action by the
parties at the right time.

Maintaining good morale - we are all human and the best results are
based on trust, recognition, rewards, satisfaction and fulfilment,
allowing people maximum freedom of action.

THE STANDARD CLAUSE

In order
to invoke either mediation or arbitration, it is my opinion that it is in the
best interest of all parties that a mediation or arbitration clause, or a clause
dealing with both processes be inserted in commercial contracts where the
parties wish to invoke alternative dispute resolution procedures - instead of
taking their dispute to court. This involves the parties considering how they
wish to resolve their disputes when a particular dispute occurs. Do they wish
all disputes to go to arbitration or mediation, or do they wish some disputes to
go to arbitration and mediation leaving the remainder of disputes to the court
process?

I include
here a copy of a standard clause which I generally use for many contracts which
I draft.

MEDIATION/ARBITRATION

If a dispute arises between the parties relating to this
Agreement, or arising out of this Agreement the parties agree to use the
following procedure as a condition precedent to any party pursuing other
available remedies;

(a)

A meeting shall be held promptly between the parties, attended by
individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the
dispute.

(b)

If, within 7 days after such meeting, or such further period as
is agreeable to the parties, the parties have not succeeded in
negotiating a resolution of the dispute, they agree to submit the
dispute to mediation and to bear equally the costs of
mediation.

(c)

The parties will jointly appoint a mutually acceptable mediator,
seeking assistance in such regard from the British Columbia
International Commercial Arbitration Centre if they have been unable to
agree upon such appointment within 20 days from the conclusion of the
negotiation period.

(d)

The parties agree to participate in good faith in the mediation
and negotiations related thereto for a period of 30 days. If the parties
are not successful in resolving the dispute through the mediation, then
the parties agree that the dispute shall be settled by arbitration in
accordance with the Commercial Arbitration Act, S.B.C. 1986 as
amended. The decision of the arbitrator shall be final and binding and
shall not be subject to appeal on a question of fact, law or mixed fact
and law.

The costs of mediation or arbitration shall be shared equally between
the parties. Costs shall not include costs incurred by a party for
representation by counsel.

Unless the parties otherwise agree, the rules of the British Columbia
International Commercial Arbitration Centre shall apply.

MEDIATION

My concise
definition of mediation is the process of adjusting each party's level of
expectation without suffering a loss of face. In many cases, the process deals
strictly with money. On many other occasions, the process deals with the
interests of the parties - not their position. There are many books available to
the practitioner and to their client on mediation. They include:

Getting to Yes, by Roger Fisher and William Ury;

Getting Past No, by William Ury;

Getting Ready to Negotiate, by Roger Fisher and Daniel
Ertel.

Mediation is different from the adversarial litigation process. It does not
involve the search for truth about the legal and factual issues in the case but
rather is involved in a search for a final solution to a dispute. In order for
mediation to be successful it requires not only trust in the mediator but also a
commitment by the parties to resolve the dispute. Failure in either one of those
factors will result in the dispute continuing.

In
assessing factors to consider when selecting a mediator the following questions
should be considered:

Do you want a rights - based mediator or interest based mediator?

What kind of mediator do you need - evaluative or neutral?

Do you want the mediator to tell you what the outcome at trial might be?

Is the mediator style suited to the case?

Do you want a mediator with practical or technical experience in the
area of the dispute?

Has a mediator been involved in other disputes in the same industry?

Will the mediator by sympathetic to your particular client?

Does the mediator have an institutional bias - that is to say in favor
of the "little guy" or the "big guy", the insured or the insurer?

The preparation for the mediation session is very important. Mediation is
client, not lawyer driven and therefore the client plays a major role. Both the
client and their lawyer must be fully prepared for mediation.

Preparation includes:

Who should attend? There must be a decision maker from each party with
the authority to settle at the mediation session or standing by a telephone
or fax machine.

The decision to bring in key technical people or experts.

The formulation of strategies to deal with hot issues.

The ability to identify the other side's important issues.

The ability to brainstorm about settlement proposals.

Your opening.

Your bottom line.

The ability to assess the best alternative to a negotiated agreement or,
namely the next best process or step which a disputant would take if an
agreement could not be concluded through negotiations vs. the ability
to assess the worst alternative to a negotiated agreement, namely the worst
process or step which a disputant would or might be forced to take if an
agreement could not be concluded through negotiations.

The lawyer's role in mediation is quite different from that at trial. The lawyer
is not there to be confrontational. This is not the time to object to evidence
or call the other side a liar or a cheat. He or she is there to assist in
resolving the dispute and to prepare the Memorandum of Agreement once that
dispute has been resolved.

In any
case, it is important to prepare a Mediation Brief for delivery to the mediator
in sufficient time for the mediator to be able to absorb the nature of the
dispute prior to entering the mediation session. I don't propose to set out all
of the material necessary for the preparation of a mediation. There is
sufficient material out there for your attention.

One of the
important functions of the party and their lawyer is to listen. Remember, when
one is talking and one is listening, only the one who is listening is learning.

HELP - NON PROFIT SERVICE PROVIDERS

We are
fortunate in British Columbia to have a number of service providers to assist
the parties or their counsel who are unfamiliar with the process (including
those who are familiar with the process) in setting up a mediation or
arbitration. I shall speak of only three such organizations, each of which are
not in the profit making business.

Each of
these organizationshas a considerable amount of literature, together
with websites, which will assist the parties and their counsel in deciding the
appropriate process. I suggest that you become acquainted the three
organizations - read their literature, visit their website, contact them and ask
questions.

1. BCICAC.
BCICAC stands for the British Columbia International Commercial Arbitration
Centre located at:

Let me add that mediation deals with the former namely the ability to
communicate including the commitment to active listening. Arbitration and its
"public cousin" litigation, deals with the latter - namely, taking turns
talking.